Question 1

What is a finiquito (severance agreement)?

Accepted Answer

A finiquito is the legal document that ends the employment relationship between employer and employee. It details all payments owed to the employee upon contract termination: pending wages, proportional vacation, severance compensation, and other owed amounts.

Question 2

When is a finiquito required?

Accepted Answer

It is required whenever an employment relationship ends, regardless of the cause. The employer has 10 business days from the contract termination to provide the finiquito and corresponding payments to the employee.

Question 3

What are termination causes?

Accepted Answer

These are the legal reasons for ending an employment contract, established in Articles 159, 160, and 161 of the Labor Code. The cause determines whether the employee is entitled to years of service compensation and prior notice payment.

Question 4

When does years of service compensation apply?

Accepted Answer

It only applies when the dismissal is for business needs (Art. 161). It does not apply for voluntary resignation (Art. 159 N°2), mutual agreement (Art. 159 N°1), or disciplinary causes (Art. 160). If the employee believes the dismissal was unjustified, they may challenge it in court.

Question 5

What are the compensation caps?

Accepted Answer

There are two legal caps: (1) Maximum 11 years of service (330 days), and (2) the monthly salary for calculation cannot exceed 90 UF. Both caps apply simultaneously. For contracts prior to August 14, 1981, the 11-year cap does not apply.

Question 6

How are year fractions calculated?

Accepted Answer

If the fraction of a year exceeds 6 months, it counts as a full year for compensation purposes. For example, 3 years and 7 months count as 4 years. If it's 3 years and 5 months, only 3 years are counted.

Question 7

What is proportional vacation?

Accepted Answer

It is the vacation days the employee has accrued but not taken at the time of termination. Calculated proportionally: 15 business days per year worked (or more if agreed), minus days already taken.

Question 8

How is proportional vacation calculated?

Accepted Answer

The formula is: (15 days ÷ 12 months) × months worked = proportional days. Then subtract days already taken. The daily rate is the monthly salary divided by 30. Example: 18 months worked, 0 days taken → 22.5 days × (salary/30).

Question 9

What is prior notice?

Accepted Answer

When dismissal is under Art. 161 (business needs), the employer must notify the employee at least 30 days in advance. If not, they must pay a substitute compensation equal to 1 month's salary.

Question 10

What is the deadline for severance payment?

Accepted Answer

The employer has 10 business days from the employee's separation to provide the severance payment. If not paid within this period, wages and compensation are adjusted for inflation plus interest.

Question 11

Must it be ratified before a witness?

Accepted Answer

Yes. For the finiquito to have full legal effect, it must be ratified by the employee before a minister of faith: a labor inspector, notary public, civil registry officer, or municipal secretary. Without this ratification, the employee can still claim differences.

Question 12

What if I don't sign the finiquito?

Accepted Answer

If you disagree with the amounts, you are not obligated to sign. You can file a claim with the Labor Inspection or sue in labor courts. You have 60 business days from dismissal to file the lawsuit (suspended during administrative claim, up to 90 days).

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